Whiting Petroleum: Gauging the Positives

Even though Whiting Petroleum (WLL) is struggling due to weakness in the crude oil market and a high debt, there are certain positives regarding the company that should not be missed. For example, Whiting Petroleum has enough liquidity and a strong capital structure. The company has $ 38 million cash in hand and an undrawn credit facility of $3.5 billion on a borrowing base of $4 billion that remained unchanged after redetermination with its lenders.

This shows the confidence that Whiting Petroleum’s lender group has in the quality of its assets and in the strategic plans that the company is following.

Further, the first major bond maturity is still two years away from now.

Thus, Whiting Petroleum can have enough time to work out its cash flow fundamentals and may be the energy market improves before that. And Whiting Petroleum is well within all of the covenants in its credit agreement and bond indentures.

What Whiting is doing to survive?

To weather these times of low oil and gas prices, oil and gas are focusing on their efficiencies more than ever. Some are focusing on their core assets while selling off the non-core assets to generate some cash flow and reduce some debt. On the similar lines, Whiting Petroleum has completed a total of approximately $ 400 million of divestiture in non-core assets with an estimated 2015 production of 11.6 MBOE/d remaining.

Estimates:

For the fourth quarter, analysts have given a projection of a loss of $0.22 per share on revenues of $548.01 million. For the full year 2015, analysts are expecting a net loss of $0.66 and $2.27 billion in revenues. The company posted an adjusted diluted net loss per share of $0.17 on revenues of $508 million compared to an EPS of $1.24 on revenues of $813.13 million. Whiting Petroleum, however, beat Thomson Reuters’ consensus EPS estimates for a net loss of $0.25 per share.

Conclusion

Whiting Petroleum is in a well-balanced position right now. Although it has not posted a very outstanding result for the previous quarter, it has got some strong points. It has reduced its operating costs and capex drastically. It has got some quality assets that are showing further improvements in efficiency and capacity. A big percentage of its production is hedged for the coming years as mentioned in the earnings presentation. And lastly, the confidence shown in Whiting Petroleum by its lenders provides a positive signal to its equity investors as well. Hence Whiting is a decent bet in the current price environment and will get better as the prices increase.